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Wednesday, 30 November 2016

If you follow Forex in any way, you know that Forex robots have become wildly popular. With the overabundance of Forex robot sales pitches, it is hard to find a robot that is actually successful. In this article, we will show you how to find the best Forex robot for your trading style, as well as what you need to know about your EA and what your realistic goals should be.

If you are looking to purchase a Forex robot, you are most likely looking to make a profit. This means different things to different people. You may be content making $50/week, or you may be seeking much bigger money. The greater your risk tolerance, the greater the chance you will strike it big. At the same time, taking on more risk also means the chance to take bigger losses.
Your risk tolerance is going to be a key factor in dictating which robot is best for you and your trading goals. After determining this, you should look for robots that suit your trading style and analyse various statistical factors including maximum drawdown, profit factor, expectancy and efficiency. A majority of this information can be found in the Best Forex Robot report at www.bestforexrobot.com.

One thing you should realize upfront is that finding the robot that is best for you is going to cost you both time and money. There are numerous elements to look for when choosing your robot. Much of the key statistical information needed to make a sound decision can be found in the best Forex robot toolkit.

It is crucial to understand that most Forex robots only work efficiently in certain types of markets. What does this mean? Some robots perform better in range bound markets while others are more effective in trending markets. The problem lies in that it is often very hard for a trader to determine if the market is in a range or trending. One key thing you must remember is in order to achieve success with your Forex robot you should never give up the gains that it makes during a favourable market when the market is unfavourable.

So what does this mean? Assuming that your robot is most efficient in a trending market, as soon as the market starts to range you will run into complications and might begin losing money. In order to be successful with this robot you cannot lose money during the ranging market that you made during the trending market.
Furthermore, you must determine if your robot is sustainable which entails backward and forward testing it through a range of market conditions. If your robot's profitability is sustained, then it can be considered robust. Keeping this in mind, you must always remember that past results are never an indication of future performance.

You need to assure that a robot has been both back and forward tested by the vendor before even considering making a purchase. Once you have decided to go forward with the purchase you need to perform your own testing. A good Forex broker can show you how to do this. At this point, if you are unhappy with the robot’s performance, you should return it if possible. On the other hand, if you are happy with the robot’s performance, you should run it on a live micro account at first so you are only risking minimal capital in the beginning.
Our hope is that after reading this article, you should now have the proper tools and confidence to embark on your robot trading journey. Let's take a quick moment to do a final review of what you need to be a successful robot trader:

1.) Determine if your robot is robust and in line with your expectations of return.
2.) Perform extensive testing of your robot before taking it live.
3.) Start trading live on a micro account to minimize losses.
Following the guidelines above will help you get one step closer to Forex success.

Asian stocks tried to stabilise after a rocky November month drew to a close, but Wednesday's session brought new anxieties as Chinese equities and commodities tanked amid worries that Beijing's efforts to support its currency could squeeze liquidity.

Analysts said moves by China's central bank in recent days to shore up a sliding yuan were sucking additional funds from the banking system, which is pushing up domestic borrowing costs.

"The stress could continue for a while," said Gu Weiyong, chief investment officer at hedge fund Ucom Investment Co, which specializes in fixed-income investment.

"Whether the situation gets better depends on the willingness of the central bank to inject more liquidity into the system."

Coking coal and steel rebar futures prices were on track for their biggest one-day drop on record while Chinese stocks .SSEC were the worst performing stock market in the region with a drop of 1 percent. and

The decline in Chinese stocks weighed on regional markets with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS trimming early gains to be up 0.2 percent.

While it held near its highest levels since Nov. 11, the index was set for a second consecutive monthly drop in a sign of the uncertainty around U.S. President-elect Donald Trump's administration and the outlook for global growth.

European stocks are expected to edge higher in early deals.

A six percent rise in the dollar against a trade-weighted basket of currencies .DXY since Trump's upset U.S. election win has hammered emerging markets, as investors pulled money out in favour of U.S. dollar-based assets on bets Trump will boost fiscal spending, growth and inflation.

More than $16 billion have been sucked out of emerging markets in the two weeks following the Nov. 8 vote but stock exchange data in India, Indonesia, Philippines, Taiwan, Thailand and South Korea indicate the outflows may be slowing.

"We are starting to see some pull back on the U.S. reflation trade and stabilisation in US rates," said Fan Cheuk Wan, head of Asia investment strategy at HSBC Private Bank.

Valuations also remain attractive for Asian stocks. On a price-to-book basis, MSCI Asia ex-Japan remains below a ten year median value of 1.8 times, according to Thomson Reuters data.

In currency markets, the dollar continued to take a breather against a trade-weighted basket of its peers .DXY, down 1 percent in the last four days.

The dollar's recent gains - 7 percent versus the yen and 3 percent against the euro - has come on the back of expectations of stepped up fiscal spending, higher inflation and a faster pace of monetary tightening by the Federal Reserve. However, market watchers say further dollar gains will be hard fought.

"The expectations phase will likely end soon as investors are focused on what the real impact of the Trump administration would be on the market," said Yoshinori Shigemi, a global market strategist at JPMorgan Asset Management.

Treasury yields have edged lower after peaking at 2.42 percent on the ten-year benchmark bond last Friday. The curve, the gap between the ten and two year yield, has steepened by 20 basis points in the last three weeks.

Oil slumped by roughly 4 percent on Tuesday before bouncing somewhat as most analysts concluded the OPEC bloc would cobble together a deal in Vienna to cut production to some extent. The meeting starts at 1000 GMT.

Brent futures were up 1 percent at $46.80 per barrel while U.S. crude gained 0.6 percent to $45.50 per barrel.

A broad index of commodities was down 2 percent. Spot gold was up 0.4 percent at $1192.74 an ounce.

The European Central Bank is ready to temporarily step up purchases of Italian government bonds if the result of a crucial referendum on Sunday sharply drives up borrowing costs for the euro zone's largest debtor, central bank sources told Reuters.

Italian government debt and bank shares have sold off ahead of the Dec. 4 referendum on constitutional reforms because of the risk of political turmoil. Opinion polls suggest the 'No' camp is heading for victory, which could force out Prime Minister Matteo Renzi in the latest upheaval against the ruling establishment sweeping the developed world.

The ECB could use its 80-billion-euro ($84.8 billion) monthly bond-buying programme to counter any immediate, further spike in bond yields after the vote, smoothing market moves and supporting bonds, according to four euro zone central bank sources who asked not to be named.

The preparations show that even though the proposed Italian reforms - such as reducing the powers of the upper house of parliament - have no relation to sovereign debt or economic policy, the fact Renzi has staked his premiership on the outcome of the vote has made it a flashpoint for financial markets.

Italian bond yields fell to a one-week low on Tuesday in response to the Reuters report.

The sources said the ECB bond-buying scheme was flexible enough to allow for a temporary increase in Italian purchases and that such a move would not necessarily need to be rubber-stamped by the ECB's Governing Council, which is due to meet on Dec. 8 to decide on whether to keep buying bonds after March.

But they stressed this would be limited to days or weeks, to counter any immediate market volatility, because the asset-purchase programme was designed to shore up inflation and economic growth in the entire euro zone and was not intended to fight crises in individual countries.

This means that, if Italy or its banks needed longer-term financial support, Rome would need to formally ask for help.

"The Governing Council understands that there is some space to help Italy, which will be used, if needed. The asset purchase programme has built-in flexibility," said one of the sources. "The key is that the ECB has to be convinced the volatility can be overcome by using this flexibility."

The ECB declined to comment.

With one of the world's largest public debt piles, Italy's borrowing costs are closely watched as a potential trigger for market instability in the wider euro zone.

They risked spiralling out of control during the sovereign debt crisis until ECB President Mario Draghi pledged in 2012 to do whatever it took to save the euro.

Renzi has said he will resign if Italians reject his reforms, which would abolish the elected upper house Senate and replace it with a chamber of regional representatives with much reduced powers. The government is also proposing taking back some key decision-making powers from the regions.

Investors worry that his departure would lead to political instability and bolster the anti-establishment 5-Star Movement, which has called for a referendum on euro zone membership.

Speaking in public, ECB officials remain sanguine.

Draghi emphasised on Monday that Italy's debt was sustainable, albeit with no room for complacency given its huge sovereign debt pile.

Vice President Vitor Constancio opened the door to an ECB intervention last week but also stressed that still-low Italian bond yields did not point to investor fears that the country may crash out of the euro zone.

Indeed, the health of Italian banks, rather than the governments' own borrowing costs, may be Rome's biggest worry in the aftermath of a 'No' vote.

Italy's 10-year bond yields stand at 2 percent, the highest level in more than a year but nowhere near the 7 percent level that prompted emergency ECB purchases in 2010-11 and eventually led to the resignation of Prime Minister Silvio Berlusconi.

A Reuters poll of 32 analysts conducted on Nov 24-25 showed investors are likely to demand an extra 25 basis points in yield to hold benchmark Italian debt over its German equivalent if the reforms are rejected, with the euro dipping 1.25 percent.

Italian banks' share prices indicate investors are concerned about their ability to raise the cash they need to work off their huge piles of unpaid loans, a legacy of the financial crisis that is hampering confidence in the sector and curbing economic growth.

Shares in Italian bank Monte dei Paschi di Siena are near all-time lows over concerns it may fail to raise the 5 billion euros it needs as part of a rescue plan agreed with the ECB, which is also the euro zone's banking supervisor.

The stock of larger peer UniCredit, which is also planning a cash call, is also close to a record low.

Big international investors are holding huge short positions on Italian assets, the CEO of the Italian exchange said on Tuesday.

Euro zone central bank sources say there is little the ECB can do about the banks' need for capital unless Italy itself asks for a rescue programme for its banking sector.

This would also unlock further, country-specific ECB purchases of Italian debt, known as Outright Monetary Transactions (OMT). These, unlike the current asset-purchase programme, are not tied to the "capital key", or how much capital each country has paid into the central bank.

"There is a risk that a bout of volatility would have a broader impact on the bank sector," one of the sources said. "At that point, it's not for the ECB to act. That's typically where OMT needs to come in with all the requirements, including a (rescue) programme."

Asking for such a programme has been an unpalatable option for Rome as it would require private investors in banks to lose their money in a so-called bail-in before European public funding can be used.

Tuesday, 29 November 2016

The dollar clawed back some losses on Tuesday as Italian political woes weighed on the euro, though the greenback remained shy of recent highs after U.S. Treasury yields stepped back from multi-month highs.

Volatile crude oil prices ahead of this week's oil producers' meeting kept investors' risk appetite in check. The Organization of the Petroleum Exporting Countries (OPEC) will gather in Vienna on Wednesday to discuss a planned output cut in an effort to curb a supply glut.

Political risks helped drag down the euro from its nearly two-week high of $1.0686 touched overnight. It last traded at $1.0599, down 0.2 percent from late Monday's North American levels.

Worries about Italy's banking system have been mounting ahead of a Dec. 4 referendum on constitutional reform, which could unseat the government of Prime Minister Matteo Renzi.

"Renzi is not obligated to step down, but has said he intends to if he loses, which has weighed on the euro," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust.

Italian lender Monte dei Paschi di Siena (BMPS.MI) faces more than 8 billion euros of legal claims, and says its weakening liquidity and the potential for more bad loan writedowns are among risks to its 5-billion-euro rescue plan.

The dollar index, which tracks the greenback against a basket of six major rivals, scaled a nearly 14-year peak of 102.050 .DXY on Thursday before profit-taking and oil price jitters brought it back down to earth. It was last at 101.290, steady on the day.

Since the victory of U.S. President-elect Donald Trump on Nov. 8, the dollar has soared in line with yields on U.S. Treasury bonds, which have sold off on expectations that the Trump administration will embark on stimulus policies and boost inflation.

These expectations helped push up the benchmark 10-year Treasury yield to a 16-month high of 2.417 percent last week, and the 2-year yield to a 6 1/2-year high. On Tuesday, the 10-year U.S. yield stood at 2.312 percent, down from its U.S. close on Monday of 2.320 percent. [U/S]

The dollar edged up 0.1 percent to 111.99 yen , off its overnight low of 111.35 but well below an 8-month high of 113.90 touched on Friday.

"The dollar has been pulling back now in response to volatile oil prices, after rising on expectations of what Trump will do," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo.

"Against the yen, it could even fall back to the 110 level, depending on what oil does, and we also have U.S. data this week - although right now, the employment figures seem like a long time away," he said.

Crude prices have been on a roller coaster ride as the market reacted to the developments on whether major producers would be able to reach an agreement on the contentious issue of trimming their production.

Later on Tuesday, investors will look to U.S. third-quarter gross domestic product data as well as readings on consumer confidence and consumption for trading cues. They will be followed by the November employment report on Friday.

Data released early on Tuesday showed that Japan's unemployment rate in October held steady as the availability of jobs improved and household spending fell at a slower pace, a tentative sign that a robust labor market is lending support to domestic demand.

The dollar edged down against a basket of major currencies on Monday, surrendering some gains after a sharp rally that followed Donald Trump's surprise victory in the U.S. presidential election.

The greenback had surged more than 4 percent against a basket of currencies in the wake of the election earlier this month, with investors expecting a Trump administration to bring an expansion of fiscal policy, boosting inflation and pushing up interest rates.

But after hitting an almost 14-year-high of 102.05 on Thursday, the dollar dipped on Friday and added to those losses on Monday, with the index falling to 101.32.

The greenback fell as much as 1.5 percent to 111.32 yen, having soared more than 8 percent in the wake of Trump's victory to its highest levels in eight months against the safe-haven Japanese currency. However, it recovered about half of those losses, last down 0.6 percent at 112.38 yen.

Most analysts said the dip in the dollar since Friday was simply a corrective pullback with the greenback still on track for its strongest two-month gain since early 2015.

"It looks much more like a correction than anything else – a Monday morning clearing of the decks before the end of the month," said Societe Generale macro strategist Kit Juckes in London.

However, other analysts suggested that the dollar's dive against the yen was the result of the President-elect's tweets over the weekend. Trump alleged that "illegal" votes were responsible for his loss in the popular vote to Democratic challenger Hillary Clinton in response to a recount effort organized by Green Party presidential nominee Jill Stein.

"The blatant lie without any proof - and one that has been roundly challenged by all of the country's voting experts - was unprecedented in American politics and may have made some market traders doubt Mr. Trump's stability," BK Asset Management's Managing Director of FX Strategy Boris Schlossberg wrote in a note to clients.

The euro climbed as much as 1.1 percent against the greenback to an 11-day high of $1.0686, also boosted by the election of Francois Fillon as the centre-right candidate in next year's French presidential elections. The reformist former prime minister is now favoured to become president, with a flash opinion poll showing he would easily beat National Front leader Marine Le Pen in a run-off second round. The euro retreated from those gains by the start of North American trading, up 0.1 percent against the dollar at $1.0595.

Sterling slipped against the euro on Friday but was still on track for its longest run of weekly gains since early 2015, with investors switching their focus from the political risks facing Britain towards those facing the euro zone.

Data confirming that Britain's economy grew 0.5 percent in the third quarter, as anticipated, and that business investment expanded more than expected, had little impact on the currency.

Though the pound was down half a percent against the single currency on Friday at 85.23 pence per euro, it was on course for a fourth straight week of gains and was heading for its best month in eight years with just over three trading days of November left, after a 5 percent rise.

Some analysts said the euro - which this week hit 20-month lows against the dollar - had been given some support on Friday by speculation that the European Central Bank will delay any extension in its asset-purchase programme until January.

Sterling is still almost 10 percent weaker against the euro compared with before Britain's vote to exit the European Union, but it has climbed 5 percent since the start of November, as the euro has weakened on uncertainty over an Italian constitutional referendum in just over a week's time and over French and German elections next year.

Against the dollar, sterling is still down 16 percent since the Brexit vote, though it was 0.1 percent up at $1.2455 on Friday. Analysts are split over the broader outlook for sterling heading into early 2017, when Article 50 is due to be triggered, kicking off formal Brexit talks with Brussels.

"There seems to be a call for a near-term rally in sterling; we don’t really see that," said ING currency strategist Viraj Patel. "What we’re looking for is another layer of bad news and we suspect we may get it in the first quarter of next year.

"For Cable (sterling/dollar) you've got a double-whammy of higher U.S. yields plus the triggering of Article 50 – that brings about another layer of uncertainty," Patel added.

The U.S. Federal Reserve is widely expected to raise interest rates at its policy meeting next month and then to continue increasing them steadily over the course of next year, which should strengthen the dollar against most currencies.

The Bank of England, by contrast, cut UK interest rates to a record low of 0.1 percent in the aftermath of Brexit and is expected to keep them there for all of 2017.

ALSO IN FOREIGN EXCHANGE ANALYSIS

Sterling drifts lower, unmoved by Vlieghe message

Earlier in the week, sterling got a small boost from the government's Autumn Statement on the budget that, while revising down growth forecasts, was more upbeat and growth-supportive than some had expected.

"The UK economy has been resilient so far following the UK’s referendum. We remain positioned for sterling upside over a 6 month horizon via options," wrote BNP Paribas strategists in a research note.

Monday, 28 November 2016

The dollar and U.S. bond yields fell on Monday as investors reversed a "Trumpflation" trade that has gripped markets since the U.S. elections, after oil prices slid on fears that producer countries meeting this week could fail to agree an output cut.

Brent crude futures last traded at $47.13 per barrel, down slightly on the day, after having fallen by as much as 2.0 percent in early Asian trade, following on from a 3.6 percent fall on Friday as doubts arose over whether the Organization of the Petroleum Exporting Countries would reach a deal later this week.

Prospects of reduced upward pressure on inflation from oil prices, prompted investors to temper expectations for rises in U.S. interest rates, bring down treasury yields and the dollar.

That gave some relief to Asian shares, which had underperformed on worries about capital flight to higher-yielding U.S markets in the weeks since Donald Trump's Nov.8 election win.

In contrast, U.S. stock futures slipped 0.2 percent after their stellar performance this month on hopes President-elect Trump's policy of fiscal spending, deregulation and protection of domestic industries will boost U.S. inflation and benefit Corporate America.

European shares are expected to dip, with spread-betters looking at a fall of 0.2 percent in Germany's DAX .GDAXI and 0.1 percent in Britain's FTSE.

Japan's Nikkei average .N225, which had performed even better than Wall Street thanks to the yen's fall, ended down 0.1 percent.

"It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump's policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.

Wall Street's four main indexes .DJI .SPX .IXIC all hit record highs last week, a feat last achieved in 1999.

Yet some investors question whether the market may have got carried away with optimism on Trump's policy, given the uncertainty on the political neophyte's presidency, including on how closely he can work together with the Congress.

But languishing oil prices, giving investors a more immediate reason to have second thoughts about how prospects for inflation and U.S. interest rates.

Saudi Arabia said on Friday it will not attend talks on Monday with non-OPEC producers to discuss supply cuts.

"Oil prices have fallen considerably on worries about the deal. That would pressure energy shares, and could hit the entire stock markets. Given their rally in recent days, it's no surprise to see some adjustment," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Saudi Arabia's energy minister Khalid al-Falih said on Sunday that he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.

His comments raised worries that a preliminary agreement reached in September for OPEC to reduce output to between 32.5 million and 33 million barrels per day may fall apart when OPEC ministers meet on Wednesday to finalize that deal.

OPEC also wants non-OPEC producers such as Russia to support the intervention by curbing their output and many market players still expect them to reach a deal.

As lower oil prices reduce inflationary pressure, they sapped momentum for a sell-off in U.S. Treasuries and a rally in the dollar, the market's favorite play since the U.S. election.

The dollar sank more than 1.6 percent against the yen to as low as 111.355 yen JPY=, down sharply from its eight-month high of 113.90 set just on Friday. It last traded at 111.90 yen.

"As long as the dollar holds above 111-111.50 yen, I do not judge the (dollar's rising) trend has changed," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered in Tokyo.

The dollar's index against a basket of six major currencies stood at 100.88, slipping 0.6 percent on day and off its 13 1/2-year high of 102.05 touched on Thursday.

The dollar shed more than 0.5 percent against many emerging market currencies, including the Mexico peso the biggest loser after Trump's election victory, the South African rand and the Turkish lira.

The euro gained 0.8 percent to $1.0655, extending its rebound from its near one-year low of $1.0518 touched on Thursday.

The single currency has so far shown limited reaction to the French conservatives' presidential primaries on Sunday.

Former Prime Minister Francois Fillon, a socially conservative free-marketeer, won the run-off, setting up a likely showdown next year with far-right leader Marine Le Pen that the pollsters expect him to win.

Gold bounced back to $1,192.0 per ounce from Friday's low $1,171.5, which was its lowest level since early February.

Politics, economics and finance have all been turned on their head in 2016, and investors are already looking ahead to 2017 with anticipation and trepidation.

The consensus, broadly, is that the 35-year bull market in bonds is over, inflation is back, central banks are maxed out, and for the first time in a decade any stimulus to the global economy will now come from governments.

The implications for markets appear to be further increases in bond yields, developed world stocks and the dollar, while emerging market currencies, stocks and bonds are expected to struggle under the weight of higher U.S. bond yields.

In equities, developed markets are favoured over emerging, cyclical sectors over defensive, banks are expected to benefit from steepening bond yield curves, while infrastructure spending could boost housing and construction stocks.

That's the consensus. But what goes against that grain? Where might the wrinkles appear? And even within the broad consensus, are there any eye-catching forecasts or trade recommendations?

1. Bond yields to FALL?

HSBC, who correctly called the recent slide in U.S. bond yields to historic lows, says bond yields may well rise next year and expects 10-year Treasury yields to hit 2.5 percent.

But in the first quarter.

After that, HSBC's bond strategist Steven Major reckons they will fall back sharply again to 1.35 percent - effectively retesting the multi-decade low struck this year - because an initial rise to 2.5 percent would be unsustainable by tightening financial conditions, dragging on the economy and constraining the Fed. A bold call.

2. "Peak" 2016

For Bank of America Merrill Lynch, 2016 saw "peak liquidity, peak inequality, peak globalization, peak deflation" and the end of the biggest ever bull market in bonds. That all starts to reverse next year. "For the first time since 2006, there will be no big easing of monetary policy in the G7, and interest rates and inflation will surprise to the upside."

They even pin a date on when the bond bull run likely ended: July 11, 2016, when the 30-year U.S. bond yield bottomed out at 2.088 percent. It's 3 percent today.

3. Black Swans

Economists at Societe Generale illustrate a graphic with four "black swans" that could blight the global economic and market landscape next year for good or bad. Mostly bad news. The tail risks they see as most likely to alter next year's outlook stem from political uncertainty (30 percent risk factor), the steep increases in bond yields (25 percent), a hard landing in China (25 percent risk factor), and trade wars (15 percent).

4. The euro also rises

"The dollar is overvalued versus other G10 currencies." Not something you hear too often, but it's the view of Swiss wealth management giant UBS. They predict the euro will end next year at $1.20, going against the growing calls for parity (it hit a one-year low below $1.06 last week) or even lower. The euro will also draw support from the ECB tapering its QE, while undervalued sterling will pick itself up from its Brexit mauling to rally against the greenback.

5. The "good carry" in EM

Few dispute that a higher dollar and U.S. yields next year will hurt emerging markets. Goldman Sachs has long championed a stronger dollar and higher yields. Two of their top 2017 trade tips, however, involve buying EM assets.

One is going long on an equally weighted FX basket of Brazilian real, Russian rouble, Indonesian rupiah and South African rand versus short on an equally weighted basket of Korean won and Singapore dollar to earn "the good carry". The other is going long Brazilian, Indian and Polish equities.

6. More QE from the ECB?

Inflation has bottomed out, the Fed is raising rates, and other central banks are beginning to reduce their stimulus. The ECB will taper its 80 billion euros-a-month QE program, right?

Maybe not.

RBC Capital Markets expects the ECB to not only extend QE in December, but to consider extending it again later next year as inflation and growth fall short. "Even toward the end of 2017, the discussion will be very similar to that seen at present: how can the ECB continue to stimulate the economy?"

That could widen the already yawning gap between U.S. and euro zone yields. The 10-year spread this week hit its widest in over quarter of a century (210 basis points) and a fall in the 2-year German yield to a record low -0.74 pct pushed the spread to its widest in a decade (185 bps).

7. $1 trillion U.S. earnings bonanza

How much offshore earnings can U.S. companies bring back if president-elect Trump follows through with his pledge to cut corporate tax? About $1 trillion, according to estimates by Deutsche Bank. This could give U.S. stocks, already at record highs, another shot in the arm. Citi reckons global equities will rise 10 percent next year, led by developed market indices. A 10 percent rise in the dollar and cut in U.S. corporation tax to 20 percent could add 6 percent to global earnings per share. "If other countries also cut taxes then EPS could rise further, even against an uninspiring economic backdrop."

Friday, 25 November 2016

The dollar rose to an 8-month high against the yen on Friday as U.S. bond yields resumed their rise in Asia after the Thanksgiving break shut markets in the United States.

The dollar was up 0.3 percent at 113.710 yen JPY= after hitting an 8-month high of 113.900 yen. It was on track to rise 2.5 percent on the week.

The euro nudged up 0.1 percent to $1.0558 EUR= to put a bit of distance between $1.0518, its lowest since March hit in the previous day. The common currency was poised for a 0.3 percent weekly loss.

"We kept expecting the dollar to adjust lower during its bull phase but that has not happened yet, since there has been no real opportunity for selling to take hold," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.

"How far the dollar can run will be mostly up to how much more U.S. yields can rise," Kadota said, adding that there were not many factors to derail the dollar's momentum for now, though the turmoil in emerging markets needed watching.

Emerging market equities and currencies have been hit hard by the specter of higher U.S. interest rates and the prospect of U.S. trade protectionism that President-elect Donald Trump had advocated.

The Turkish lira TRY=, for example, slumped to a record low although the country's central bank raised interest rates for the first time in nearly three years on Thursday. The lira was hurt as European Union lawmakers called for a temporary halt to EU membership talks with Ankara.

Some expect a further sell-off in emerging markets to eventually revive demand for the flagging Japanese yen, considered a go-to currency in times of market tumult along with the Swiss franc.

Analysts also pointed to weakened expectations towards the Bank of Japan's monetary easing which until recently had helped the yen depreciate as a factor that bears watching.

"With markets casting doubts on the effectiveness of BOJ's monetary easing, there are less incentives to go short on the yen," said Minori Uchida, chief FX analyst at the Bank of Tokyo Mitsubishi UFJ.

The 10-year U.S. Treasury note yield rose about 5 basis points to 2.405 percent from the previous close on Wednesday.

The yield rose to 2.417 percent midweek, its highest since July 2015, as the market continued to bet that Trump's administration will increase debt-funded spending and spur higher growth and inflation.

The dollar index was steady at 101.720 .DXY after rising to a 13-1/2-year high of 102.050 overnight. It was enroute for a 0.6 percent gain on the week.

The Australian dollar was up 0.2 percent at $0.7430 . The Aussie has gained more than 1 percent on the week, holding its own against the dollar thanks in part to a rise in prices of commodities such as iron ore.

Sterling was steady at $1.2446 and headed for a 0.7 percent gain on the week.

The pound has been lifted this month with investor focus turning away from political risks facing Britain - namely its exit from the European Union - and towards risks elsewhere, particularly in Europe.

The dollar surged to a near 14-year high before pulling back on Thursday, clocking up records against a range of other top world currencies and skittling emerging markets.

Stronger data from the world's biggest economy and thinner volumes on the U.S. Thanksgiving holiday underpinned the dollar's gains.

The dollar .DXY had eased off highs by midday after pushing its way past more of last year's peaks against the euro to reach $1.0515, with only the March 2015 high of $1.0457 standing in the way of a drive towards parity.

The yen had skidded to an eight-month low and China's yuan to an 8-1/2 year low, while the highly sensitive Turkish lira and Indian rupee hit new troughs.

"There doesn't seem to be anything stopping U.S. yields going higher in the near-term so I think people are going to stay on the dollar trend," State Street Global Markets' head of global macro strategy, Michael Metcalfe, said.

"The only risk to this are that the dislocations in markets outside of the U.S., particularly in emerging markets, get to a point where they start to feed back into concerns (for the Federal Reserve as it looks to raise interest rates)," he said.

In contrast to all the FX noise, European shares saw a broadly quiet day, with most of the main bourses inching up on gains from chemical and insurance sector stocks but capped by weaker banks.

German business confidence data showed firms remained unfazed, for now at least, by the U.S. election win for Donald Trump and the political uncertainty bubbling in the euro zone.

However, the European Central Bank delivered an unusually downbeat message, warning that global political shifts could compound existing vulnerabilities to rising interest rates and revive worries about the euro zone's weaker economies.

It was enough to keep bond markets playing the transatlantic divide that has been widening again on bets that, while the United States may be about to raise interest rates, Europe is probably unlikely to follow suit for a couple of years.

The yield on Germany's 10-year government bond, the benchmark for the region, fell 2 basis points (bps) to 0.26 percent, while Italy, which has been plagued by political concerns ahead of a referendum on constitutional reform, outperformed with yields down 5 bps to 2.08 percent.

In the United States on Wednesday by contrast, the two-year Treasury yield hit its highest since April 2010.

The firm dollar hit most emerging market currencies, with China's yuan nearing the 7 per dollar level for the first time since May 2008.

State banks or foreign exchange authorities in China, India, Indonesia and the Philippines were all suspected of intervening to slow the slide in their currencies, traders said.

Turkey's lira TRY= and India's rupee both sank to record lows, though the lira clawed back some ground as its central bank raised one of its benchmark interest rates for the first time since 2014.

"Exchange rate movements due to recently heightened global uncertainty and volatility pose upside risks on the inflation outlook," the central bank's monetary policy committee said in its statement.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.4 percent, though the drop in the yen lifted the export-orientated Nikkei in Tokyo .N225 to a near 11-month high.

Oil prices were little changed amid all the dollar commotion and ahead of a planned OPEC-led cut in crude production at a meeting on Nov. 30.

U.S. crude was up 20 cents at $48.22 a barrel and Brent was at $49.19.

Industrial metals remained red-hot on hopes of a revival in U.S. manufacturing and infrastructure spending under Trump. London zinc hit an 8-year high and copper jumped for a fourth day in a row to put $6,000 a tonne within reach.

"Strong durable goods orders in the U.S. helped buoy investors who have viewed Trump's upcoming presidency as a positive for industrial metals demand," ANZ said in a report.

Thursday, 24 November 2016

Nov 23 Federal Reserve policymakers appeared confident on the eve of the U.S. presidential election that the economy was strengthening enough to warrant interest rate increases soon, minutes from the Fed's Nov. 1-2 meeting showed.

The minutes released on Wednesday back the consensus view on Wall Street that the Fed is poised to raise rates in December. Policymakers left borrowing costs unchanged earlier this month, just days before Republican Donald Trump triumphed in the Nov. 8 presidential contest.

Voting members of the Fed's rate-setting committee saw equal risks the economy would overshoot or undershoot their forecasts for continued growth and a tightening labor market. "Almost all of them continued to judge that near-term risks to the economic outlook were roughly balanced," according to the minutes.

Most of the voting policymakers backed holding off on rate increases "for the time being," according to the minutes, a view that was reflected in the language of the Nov. 2 policy statement.

Seventeen policymakers participated at the November policy meeting, of whom 10 had a vote. Among the wider group of participants, most said it "could well become appropriate" to raise rates "relatively soon," according to the minutes.

Some argued a hike should come at the Fed's December meeting in order to preserve the central bank's "credibility." Fed officials have already downplayed the significance of Trump's election for near-term policy decisions, although they have warned the Fed could raise rates more quickly if the federal budget deficit widens under Trump.

Fed Chair Janet Yellen said last week in congressional testimony that Trump's election did nothing to change the Fed's plans for a rate increase "relatively soon."

Most Asian stock markets fell on Thursday as upbeat economic data strengthened the prospect for higher U.S. interest rates, while the dollar's bull run continued with U.S. bond yields propelled to multi-year highs.

Japanese stocks swam against the tide and rose to a near 11-month high as the yen weakened.

Spreadbetters saw a mixed opening for European stocks, forecasting a slightly lower open for Britain's FTSE .FTSE, a marginally higher open for Germany's DAX .GDAXI and a flat start for France's CAC .FCHI.

The dollar index against major currencies rose 0.1 percent to 101.78 .DXY, not far from a 13-1/2-year high of 101.91 touched overnight.

The greenback drew support from a further rise in U.S. Treasury yields.

The two-year yield US2YT=RR hit its highest levels since April 2010 on Wednesday on further bets the Trump administration will increase debt-funded spending and spur growth and inflation.

Such a view - which has also lifted expectations for more U.S. rate hikes next year - was reinforced on Wednesday after new orders of U.S. manufactured capital goods rebounded in October. Consumer sentiment also jumped in November.

"It (the U.S. dollar) is a freight train that seems over limit at the moment, but it may have a long way to go before what looks and feels like a structural adjustment settles down," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.

The dollar was up 0.1 percent at 112.650 yen after touching an eight-month high of 112.980 overnight. It has gained roughly seven big figures since Trump's victory earlier this month.

The euro was down 0.1 percent at $1.0543 EUR= after touching $1.0526 overnight, its lowest since December 2015. The common currency has dropped nearly 4 percent in November.

The firm dollar kept most emerging market currencies on the ropes, with China's yuan nearing the 7 per dollar level for the first time since May 2008.

State banks or foreign exchange authorities in China, India, Indonesia and the Philippines were all suspected of intervening to slow the slide in their currencies on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan pared Wednesday's gains and lost 0.4 percent as focus returned to the United States. Facing the prospect of higher U.S. interest rates diverting money from emerging markets, it has lost 3.5 percent this month.

"The amount of foreign stock-dumping is likely to increase during the session due to the strong dollar and the absence of any momentum for the South Korean market to rebound," said Ha Keon-hyeong, a foreign exchange analyst at Shinhan Investment Corp.

Japan's Nikkei .N225 was up 1.1 percent, touching its highest level since early January.

Equities in emerging and developed economies have headed in different directions since Trump's win.

Higher U.S. yields have pulled those of other developed economies from rock-bottom levels, with investor money now expected to flow back from emerging markets which had offered relatively higher rates.

The Dow .DJI marked a record closing high overnight. Germany's DAX has gained nearly 2 percent since the victory by the Republican candidate. On the other hand, MSCI's emerging markets index .MSCIEF has fallen 5.8 percent this month.

Japan's 30-year bond yield rose to an eight-month peak of 0.650 percent. The German 10-year bund yielded around 2.6 percent on Wednesday, having climbed from a record low of minus 0.2 percent struck in July.

Oil prices were little changed amid uncertainty ahead of a planned OPEC-led crude production cut at a meeting on Nov. 30.

U.S. crude was up 3 cents at $47.99 a barrel and Brent was flat at $48.95.

London zinc hit an 8-year high and copper jumped for a fourth day in a row as funds poured into metals on expectations of growing strength in the U.S. manufacturing sector.

The U.S. Dow Jones industrial average hit a record high for a third straight day on Wednesday, while U.S. two-year Treasury yields and the dollar hit multi-year peaks after upbeat U.S. economic data reinforced expectations of interest rate increases.

The Dow's peak of 19,066.25 marked its third straight record intraday high, while the benchmark S&P 500 and Nasdaq slipped after touching record intraday and closing highs over the past two days. Expectations that markets would benefit from U.S. President-elect Donald Trump's policies have helped boost shares.
A 0.6-percent drop in healthcare stocks, which had a sharp run higher following the Nov. 8 U.S. election, contributed to the general weakness in U.S. shares, with Eli Lilly at last down 13 percent ahead of the Thanksgiving Day holiday on Thursday and an early market close on Black Friday.

Gains in European industrials and energy shares buoyed stocks in the region, while financials weighed on the STOXX 600 index as Italian banks were again under pressure. Europe's basic resources index eased from a 17-month high, but remained up about 1 percent .SXPP.
U.S. two-year Treasury note yields rose to 6-1/2 year highs of 1.151 percent after data showed that U.S. manufactured capital goods rebounded in October, boosting expectations of faster economic growth.

Short-and intermediate-dated debt has come under pressure, partly as investors worry that the Federal Reserve may raise rates faster than previously expected. Minutes from the Fed's last policy meeting are set to be released at 2 p.m. ET.
"People are in a holiday mindset today, but nothing appears to be in the horizon to derail the recent market strength," said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

MSCI's all-country world equity index was last down 1.34 points, or 0.32 percent, at 412.03.
The Dow Jones industrial average .DJI was up 22.5 points, or 0.12 percent, at 19,046.37. The S&P 500 .SPX was down 5.29 points, or 0.24 percent, at 2,197.65. The Nasdaq Composite .IXIC was off 26.10 points, or 0.48 percent, at 5,360.26.

Europe's broad FTSEurofirst 300 index .FTEU3 was up 0.12 percent, at 1,345.76.
The dollar index .DXY, which measures the greenback against a basket of six major currencies, surged to a more than 13-year peak of 101.910, bolstered by expectations of interest rate increases by the Fed next month and in 2017.
"Speculation of a December rate hike reached mind-boggling levels," said Lukman Otunuga, research analyst at Forex Time Ltd (FXTM) in Croydon, England. "This could ensure dollar strength remains a key theme moving forward."

ECB seeks to lend out more bonds to avert market freeze.

Oil prices whipped around on investors' doubts whether OPEC would agree to a production cut large enough to make a significant dent on the global supply glut when it meets next week, and last traded slightly lower.

Brent crude was last down 16 cents, or 0.33 percent, at $48.96 a barrel. U.S. crude was down 5 cents, or 0.1 percent, at $47.98 per barrel.
Gold slid to a 9-1/2-month low of $1,181.45 an ounce. Spot gold prices were last down $23.73, or 1.96 percent, at $1,188.13 an ounce.

Wednesday, 23 November 2016

Asian stocks bounced to one-week highs on Wednesday as investors tried to share in the exuberance of Wall Street's record run, while lofty U.S. bond yields favored the dollar at the expense of emerging market currencies.

Spread betters pointed to opening gains for European bourses, while E-mini futures for the S&P 500 held near all-time peaks ahead of the release of minutes of the Federal Reserve's last policy meeting.

With Japan on holiday, Australia's main index led the action in Asia with a rise of 1.35 percent to a one-month top helped by strength in bulk commodity prices.

China's blue-chip CSI300 index .CSI300 advanced 0.5 percent to a near 11-month peak as the yuan touched its lowest in six years.

Emerging markets have struggled in recent days as surging U.S. bond yields sucked much-needed capital out of Asia. President-elect Donald Trump's past talk of trade tariffs has also weighed on sentiment in the export-intensive region.

Analysts at JPMorgan said Trump's pledge to dump the Trans-Pacific Partnership was already priced into markets.

"What may not be factored in is the possibility of follow-through on other, more protectionist campaign proposals," they wrote in a note to clients.

"We remain concerned about this as a source of downside risk, delivering a negative surprise to markets which so far appear to be enamored of his emphasis on fiscal stimulus and deregulation since the election."

That love-affair was evident on Wall Street where the Dow .DJI closed up 0.35 percent and above 19,000 for the first time. The S&P 500 .SPX gained 0.22 percent and the Nasdaq .IXIC 0.33 percent.

Still, the market is starting to look expensive with the S&P 500 trading near 17.3 times forward 12-month earnings, compared to the 10-year median of 14.7, according to StarMine data.

YIELD GAP UNDERMINES EURO

With equities in demand, U.S. bonds were getting the cold shoulder. Two-year note yields rose as far as 1.107 percent on Tuesday, the highest since April 2010.

Yet euro debt was thrown a lifeline by European Central Bankers who reaffirmed their commitment to super-easy monetary policy. That saw yields on German two-year paper dive to record lows around -73 basis points which in turn expanded the yield premium offered by Treasuries to an 11-year peak.

The widening spread kept the euro pinned at $1.0626 EUR=, not far from last week's one-year trough at $1.0569. Against a basket of currencies, the dollar was steady at 101.00 .DXY.

The dollar also kept most of its recent hefty gains on the yen at 111.05 , though it has met resistance around 111.35 in the last couple of sessions.

Sterling was precariously poised at $1.2417 GBP= ahead of a budget update from British Finance Minister Philip Hammond.

Analysts expect some modest infrastructure spending and housing stimulus, but nothing that would radically change expectations of a weaker economy next year when difficult talks begin on the terms of Brexit.

Oil prices were mostly steady for the moment as the market hung on every comment from OPEC officials on whether cartel members would agree to an output cut.

Brent crude eased 14 cents to $48.98 a barrel, while U.S. crude lost 13 cents to $47.90.

Industrial metals advanced on talk of demand from China and the whole global reflation trade. Copper was near a 16-month high, while iron ore futures surged 8 percent on the back of higher steel prices.

World stocks on Tuesday rode the slipstream of the first joint all-time high for Wall Street's four main markets since 1999, while oil prices hit their highest level since October.

A powerful earthquake hitting the same part of Japan that suffered a nuclear disaster in 2011 nudged up the safe-haven yen. The dollar .DXY slipped off a six-month high as the rally in oil and metals prices also drove up commodities-linked currencies such as the Australian dollar.

Asia's top bourses had made solid gains overnight despite the clearest signal yet from U.S. President-elect Donald Trump that he will shake up trade with the region.

Europe's main bourses were quickly on the front foot too with London's FTSE, Frankfurt's DAX .GDAXI and the CAC 40 .FCHI in Paris up between 0.6 - 0.8 percent in early trade.

The European basic resources index .SXPP, which has now doubled from its January lows, was the best performing sector as big names Anglo American, BHP Billiton and Antofagasta jumped 4 to 5 percent.

Stocks are benefitting from a belief that Trump spending policies will spur growth.

"The fact Trump was elected means it is now seen as certain that you will see a rise in inflation and that the (Federal reserve) is going to hike rates.", said Nataxis head of equities strategy Sylvain Goyon. "Some of his strategies are really pro growth."

Having surged 4 percent on Monday, oil prices were nudging $50 a barrel again. Russian President Vladimir Putin raised hopes that producers will agree to limit output at an OPEC meeting next week. [O/R]

Benchmark bonds meanwhile were taking a break from the surge in yields and plunge in prices since Trump's unexpected victory earlier this month.

The difference between German and U.S. bond yields were back near multi-decade extremes after two of European Central Bank's top policymakers reaffirmed the bank's commitment to its mass stimulus programme ahead of a flagged review next month.

"The return of inflation towards our objective still relies on the continuation of the current, unprecedented level of monetary support, in spite of the gradual closing of the output gap," ECB President Mario Draghi said at a hearing in Strasbourg.

The bank is also likely to be wary about the uncertainty if Italy's government, as opinion polls currently suggest, loses a referendum on constitutional changes just days before the ECB meeting.

JAPAN QUAKE

The dollar's dip was a modest 0.3 percent but marked its second day in the red having snapped a 10-day and 10 percent rise against the yen on Monday that had taken it from 101 yen to over 111. It was hovering at 110.71 by 0945 GMT.

Trump, outlining plans on Monday for his first day in office next year, pledged to withdraw from the TPP Asia-Pacific free trade accord.

Such a move may lead to retaliation by trade partners such as China and could potentially derail markets, Libby Cantrill, head of public policy at bond giant PIMCO, said.

But for now, expectations that Trump's administration will adopt expansionary fiscal policies have pushed developed market stocks higher and even emerging market shares seem to have settled over the last week having initially been hit hard.

Investors in Japanese stocks also appeared unfazed by Tuesday's earthquake in northern Japan with the benchmark Nikkei average .N225 closing up 0.3 percent.

"Most of the flow into stocks seems to be retail-oriented with institutional investors preferring to sit out the rally unless they get a clearer picture on Trump's economic team," said Andrew Sullivan, managing director, sales trading at Haitong International Securities Group in Hong Kong.

The dollar's mild weakness propped up gold prices with spot gold up 0.3 percent at $1217.70 per ounce. Gold prices have fallen 10 percent since the U.S. election outcome.

It also helped emerging market currencies trim some losses after a recent battering. The Chinese yuan rebounded from a near 8-1/2 low hit on Monday.

Crude oil climbed in Asian trading with U.S. West Texas Intermediate up 1 percent as the dollar pulled back and expectations of production cuts grew.

Prices surged 4 percent to a three-week high on Monday, after comments from Russian President Vladimir Putin raised hopes that producer countries will reach a deal at a meeting next week to limit output.

European stocks were also expected to open higher with gains seen around 0.5 percent for key markets.

"Most of the flow into stocks seems to be retail-oriented with institutional investors preferring to sit out the rally unless they get a clearer picture on Trump's economic team," said Andrew Sullivan, managing director, sales trading at Haitong International Securities Group in Hong Kong.

Trump met some officials and outlined plans for his first day in office on Monday, including withdrawing from the TPP Asia-Pacific free trade accord and investigating abuses of work visa programs.

Such actions may lead to retaliation by trade partners such as China and could potentially derail markets, noted Libby Cantrill, head of public policy at bond giant PIMCO.

But for now, expectations that Trump's administration will adopt expansionary fiscal policies have sent U.S. stocks to a record high, while a belief that such policies would fuel inflation and lead to higher interest rates pushed up bond yields and strengthened the dollar.

On Monday, U.S. stocks closed at a record high and European markets moved higher.

Investors in Japanese stocks appeared unfazed by Tuesday's e earthquake in northern Japan.

"Investors will react if more manufacturers halt operations in their factories in the region, but right now the impact from the earthquake is limited," said Hiroaki Mino, director of the investment information department at Mizuho Securities.

The benchmark Nikkei average was broadly steady and the yen ticked up a shade against the U.S. dollar, although still near the five-month low hit earlier in the session.

Trading volume was generally low ahead of the U.S. Thanksgiving holiday, with expectations of a U.S rate increase next month already priced in by markets.

The dollar, which has rallied over 5 percent against a trade-weighted basket of currencies since Trump's victory, consolidated its gains.

"There is a narrative that there will be strongleadership because Republicans took the White House and both houses of Congress. But we have to keep in mind that Trump also divided the nation as well as the Republicans," said DaisukeUno, chief strategist at Sumitomo Mitsui Bank.

The dollar's mild weakness propped up gold prices with spot gold up 0.3 percent at $1217.70 per ounce. Gold prices have fallen 10 percent since the U.S. election outcome.

It also helped emerging market currencies trim some losses after a recent battering. The Chinese yuan rebounded from a near 8-1/2 low hit on Monday.

The dollar fell on Monday after rising 10 straight days as investors consolidated gains fueled by the election of a new Republican president who is expected to adopt fiscal policies leading to interest rate increases.

The greenback's weakness benefited the euro, which rose from an 11-month low hit last Friday, with political developments seen easing uncertainty surrounding next year's German and French elections.

Shaun Osborne, chief currency strategist at Scotiabank in Toronto, said the dollar's slide on Monday was just a correction or, at the very least, a consolidation.

"We remain constructive on the outlook for the U.S. dollar in the medium-term at least," Osborne said. "Rising U.S. rates, stronger growth and presumably soon, additional clarity on the economic and fiscal policy outlook contrasts with slower growth and political risks elsewhere, particularly in Europe."

Osborne said any corrections should be limited in the near term, with investors likely to snap up cheaper dollars.

In midmorning trading, the dollar index was down 0.4 percent at 100.84 .DXY. Over the last 10 days, it has posted a nearly 5 percent gain, with investors betting U.S. President-elect Donald Trump's increased fiscal spending would stoke inflation and propel interest rates higher.

Market participants expect the U.S. Federal Reserve to raise rates at its Dec. 13-14 policy meeting.

Meanwhile, analysts said German Chancellor Angela Merkel's announcement on Sunday that she would seek a fourth term, while not a surprise, is viewed as positive for the single euro zone currency.

Merkel is seen as a defender of liberal democracy in the West as investors are worried that a wave of populism and anti-globalization sentiment is spreading across Europe and threatening the breakup of the euro zone.

The euro climbed 0.4 to $1.0631 EUR= after touching its weakest levels since December 2015 on Friday.

Against the yen, the dollar hit a six-month high of 111.18 yen, but was last down 0.1 percent at 110.79.

In France, former President Nicolas Sarkozy was ousted in a party primary from the election race over the weekend. This leaves ex-prime ministers Francois Fillon and Alain Juppe fighting to become the center-right Republicans' candidate for the presidential election in May.

The winner is expected to face National Front leader Marine Le Pen, who opposes the European Union. Some analysts said Sarkozy's defeat had lessened her prospects of winning, easing investor fears about a breakup of the euro zone.

Wall Street rose on Monday morning, with the Nasdaq hitting a record intraday high, helped by a jump in technology shares and as higher oil prices boosted energy stocks.

The S&P was less than one point away from its intraday record high, while the Dow also inched closer to its record. The three indexes have rallied since the U.S. election as investors bet Donald Trump's policies would be market friendly.

Oil prices jumped 3.2 percent to a near three-week high of $48.30 per barrel amid hopes of the OPEC reaching an agreement to cut output. The dollar index's .DXY first drop in 11 days also helped.

"Investors are playing out their beliefs, which in this case is that Trump is going to bring about tax cuts and policy changes that could result in a solid equity market," said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

"This rally could end anytime, but, for the moment, the enthusiasm is still there."

At 9:39 a.m. ET , the Dow Jones Industrial Average .DJI was up 52.6 points, or 0.28 percent, at 18,920.53. Its record intraday high stands at 18,934.05.

The S&P 500 .SPX was up 9.75 points, or 0.45 percent, at 2,191.65. The index's record high is 2,193.81.

The Nasdaq Composite .IXIC was up 28.86 points, or 0.54 percent, at 5,350.37, easing slightly after a record of 5,359.56.

Tyson Foods was the biggest loser on the S&P, dropping nearly 16 percent after the meat processor reported lower-than-expected profit and said its chief executive officer would step down.

LifeLock jumped 14.4 percent to $23.70 after Symantec said it would buy the identity theft protection services company for $2.3 billion. Symantec was flat.

Headwaters rose 15.9 percent to $23.29 after Australia's Boral Ltd said it would buy the U.S. construction and building products maker for $1.8 billion.

Monday, 21 November 2016

The dollar held near 13 1/2-year highs against a currency basket in Asian trading on Monday, as investors stuck with bets that President-elect Donald Trump's administration would adopt expansionary fiscal policies that will lead to higher interest rises.

The dollar index, which tracks the U.S. unit against a basket of six rivals, added 0.1 percent to 101.31, after adding more than 4 percent last week to mark its biggest weekly rise since March 2015. It notched a high of 101.48 on Friday, its highest since April 2003.

The dollar rose to 111.190 yen, its highest since early June. It was last up 0.2 percent at 111.09 as investors positioned ahead of U.S. Thanksgiving holiday later in the week. Tokyo markets will also be shut for a public holiday on Wednesday.

Expectations that a Trump presidency will usher in higher inflation and lead to faster-than-expected Federal Reserve interest rate increases have helped power the U.S. currency.

"The dollar-yen uptrend remains intact, but the pace of the rise could be slower," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo, who predicts the pair to trade in a 109.50-112 range this week.

"It's very hard to sell the dollar against the yen, in the current situation, beyond a certain level," he said.

The dollar surged as yields on Treasuries of all maturities marked their largest two-week gains in more than five years as investors dumped U.S. government debt after the Nov. 8 U.S. presidential election.

The yield on U.S. benchmark 10-year Treasury notes rose to a one-year high of 2.364 percent on Friday. It last stood at 2.342 percent, compared to its U.S. close of 2.337 percent.

"The market is buying the dollar and selling U.S. Treasuries, and it seems this trend may continue because we don't know the details of 'Trumponomics,' and we will not have it until after the 20th of January next year," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"Until then, investors need to follow the trend," he said, adding, "We might see some correction ahead of Thanksgiving."

Data from the Commodity Futures Trading Commission released on Friday showed that speculators trimmed their dollar bets in the week through Nov. 15, as profit taking reduced net long positions after they had risen seven straight weeks.

Japanese yen net longs, meanwhile, posted their lowest level since early June, the data showed, with the yen a casualty of the dollar's strong rally.

Also underpinning the greenback, most market participants expect the U.S. Federal Reserve to raise interest rates at its Dec. 13-14 policy meeting.

James Bullard, a voting member of the U.S. central bank's rate-setting committee, said last week that the Fed will raise U.S. interest rates in December barring a major shock, such as global market volatility or bad U.S. jobs data.

The euro inched up slightly to $1.0593 but remained not far above Friday's 11-month low of $1.0569.

The Australian dollar shed 0.2 percent to $0.7324, having touched a five-month nadir at $0.7311.

China's yuan weakened to near its lowest in 8 1/2 years. The official midpoint guided by the People's Bank of China was set weaker for a 12th consecutive day at 6.8985 per dollar prior to market open on Monday, compared with the previous fix 6.8796.

The dollar rose to its highest level since April 2003 against a basket of currencies on Friday, marking its biggest two-week increase since March 2015 as traders piled bets on a massive dose of fiscal stimulus under a Trump U.S. presidency.

Also stoking the dollar rally were growing expectations the Federal Reserve would raise interest rates next month on signs of rising inflation and improved economic growth.

The greenback has climbed 7.3 percent against the yen in two weeks, its steepest such gain since January 1988 and its second-strongest performance in the era of floating exchange rates.

The dollar has been on a tear following Republican Donald Trump's Nov. 8 victory over Democratic rival Hillary Clinton, tracking surging U.S. Treasury yields amid concerns government borrowing to fund possible stimulus programs could stoke inflation.

Traders have seized on the tax cuts, deregulation and infrastructure spending that Trump campaigned on as negatives for bonds and positives for the dollar.

"It has caused a wave of dollar buying across the board," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

To be sure, it remained unclear how many, if any, of the policy proposals would materialize. Trump's stance on immigration and trade, if they become law, could hurt the dollar, analysts said.

"The dollar is the wild card," said Richard Bernstein, chief executive officer of Richard Bernstein Advisors LLC said at the Reuters Global Investment Outlook Summit in New York.

The dollar index, hit 101.48, its highest since early April 2003 before paring gains to 101.25, up 0.4 percent on the day.

The gauge of the greenback against a basket of six major currencies was on track for a 4.2 percent two-week gain, its biggest since March 2015.

While Fed Chair Janet Yellen did not explicitly say the U.S. central bank would hike rates at its Dec. 13-14 policy meeting, she told a congressional panel on Thursday that a rate increase was likely "relatively soon."

Political and economic worries abroad provided further lift for the dollar.

The euro, which is vulnerable to a slew of political risks including an Italian constitutional referendum next month and French and German elections next year, hit an 11-month low of $1.0567. It was last down 0.3 percent at $1.0595.

The greenback hit a 5-1/2 month high against the yen of 110.92 before retreating to 110.64 yen, up 0.6 percent from Thursday.

Friday, 18 November 2016

The dollar sprinted to a more than 13-1/2 year high against a basket of major currencies on Friday and U.S. debt yields hit near one-year highs on expectations that President-elect Donald Trump's policies will boost the U.S. economy.

But the post-election shift in expectations has left many emerging market currencies and assets vulnerable if investors rotate more funds back to the United States.

European shares were expected to open marginally higher, with spread-betters looking to rise of 0.3 percent in Germany's DAX .GDAXI and a flat opening for Britain's FTSE .

Concerns about the health of Italy's banks and the political repercussions of a referendum next month are rearing their head, after the spread of the Italian 10-year debt yield over German paper had risen to a high last seen in August 2014.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent to hover just above its four-month low touched earlier in the week. It looked set to log its fourth straight week of losses.

The dollar's rise, however, was a boon for Japan's Nikkei average .N225, which hit a 10-month high before ending 0.6 percent higher. The weaker yen has raised hopes for better-than-expected earnings for exporters.

On Wall Street, the benchmark S&P 500 index .SPX rose 0.5 percent on Thursday to within a hair's breadth of its record high, as the prospect of higher interest rates boosted bank stocks and consumer discretionary stocks were helped by favorable economic data and earnings.

U.S. consumer prices posted their biggest increase in six months, while housing starts surged to a 9-year high and jobless claims fell to the lowest level since November 1973.

The data supported the market's current view that U.S. growth and inflation is likely to accelerate if the Trump administration cuts taxes and increases fiscal spending.

His protectionist stance on trade could stoke U.S. inflation by limiting inflows of cheap imports, though it is likely to hurt many other countries in the near-term and many investors suspect it will ultimately damage the U.S. economy as well.

"The United States has been leading globalisation but now voters said they had enough. They said they want to stop the fall in their wages with fiscal spending and protectionism. This is a very, very big change in trend," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

The U.S. elections prompted investors to ditch their once rock-solid conviction that the growth in developed economies will remain tepid because of tough competition from emerging market economies with lower wages.

As investors tried to adjust to the new environment, the 10-year U.S. Treasuries yield rose to 2.339 percent, its highest since December, compared to around 1.86 percent before the U.S. election.

The two-year U.S. Treasuries yield rose to a 10 1/2-month high of 1.071 percent.

Rising yields also reflected market players' reassessment of the Fed's policy path down the road, beyond a likely rate hike in its Dec 13-14 meeting.

But interest rates futures for 2017 are now starting to price in one or more rate hikes next year, a sea change from before the election when they priced in a less than 50 percent chance of a 2017 rate hike, assuming the dovish Yellen would be extremely cautious in raising rates.

The dollar's rising yield attraction is lifting the U.S. currency, which rose to 110.34 yen, its highest level since early June. The euro EUR= slumped to $1.0620, a low last seen almost a year ago.

The dollar's index against a basket of six major currencies rose above its "double top" touched in March and December of 2015. The index now stands at its highest level since April 2003.

"Double top" is a technical analysis term describing a currency (or other liquid asset) rising to a high, falling, and then rising again to the same level. Breaking the double top is often seen as a bullish sign by technical analysts.

A rising dollar is particularly a problem for some emerging economies that could see potentially destabilizing capital outflows.

The Mexican peso, which has been perceived as the most vulnerable to Trump's policies because of its big exports to the United States, weakened 1 percent after the central bank raised its policy interest rates by 50 basis points to defend the currency, as the market had expected a bigger hike.

The Turkish lira hit a record low, having fallen more than 8 percent so far this week, hit by signs of more discord between Turkey and Europe.

Gold XAU= slumped to 5 1/2-month low of $1,205.9 per ounce and oil prices, which have been supported by hopes the Organization of the Petroleum Exporting Countries would reach an agreement to cap production at its meeting in Vienna on Nov. 30, were hit by the dollar's strength.

Brent crude futures fell 0.7 percent in Asia to $46.19 per barrel, down further from Thursday's two-week high of $47.62.

The election of Donald Trump as U.S. president has done nothing to change the Federal Reserve's plans for a rate increase "relatively soon," Fed Chair Janet Yellen said on Thursday in Congressional testimony that included a pledge to serve out her term.

Yellen said the U.S. central bank would change its outlook as necessary as the new administration rolls out plans for perhaps hundreds of billions of dollars in tax cuts and additional government spending. She also suggested the new government keep in mind that the United States is near full employment and inflation may be rising.

"Markets are anticipating ... a fiscal package that involves a net expansionary stance of policy and that in a context of an economy that is operating reasonably close to maximum employment with inflation heading back to 2 percent," Yellen said, suggesting new programs focus on "policies that would improve ... long run growth and productivity."

There had been some uncertainty about how Yellen would interact with a new president who at turns during the campaign spoke favourably of the Fed's low rate policies, and yet also accused the Fed of acting politically to help Democratic nominee Hillary Clinton.

Trump, during his election campaign, had also said he would replace Yellen when her term expires. Asked directly by a member of the Joint Economic Committee on Thursday, Yellen said she planned to serve out her term as chair, which ends in 2018.

While the election has not affected matters yet, they may find themselves at odds if Trump, for example, pursues a roll-back of financial regulations.

On that topic, Yellen cautioned against any effort to "turn back the clock" on the Dodd-Frank financial regulations approved following the 2007 to 2009 financial crisis because that could make a repeat more likely.

So far she said there was little risk the Fed had fallen behind the curve and would lose control of inflation.

"The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labour markets and inflation moving up," Yellen said. "The risk of falling behind the curve in the near future appears limited."

However the chair also acknowledged the uncertainty that may lie ahead as President-elect Trump rolls out his programme.

"When there is greater clarity about the economic policies that might be put into effect the (Federal Open Market Committee) will have to factor those assessments of their impact on employment and inflation and perhaps adjust our outlook," Yellen said.

U.S. Treasury yields rose on Thursday after data suggested the U.S. labour market is tightening and inflation is beginning to gain traction, which prompted investors to sell government debt.

"Yellen is saying it's full steam ahead for a Fed hike in December," said Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management. "The big question is what happens after that. Trump's election has given investors plenty of reason to question the lower for longer mantra."

The U.S. dollar rose to a 13-1/2-year high against a basket of currencies on Thursday as the bond market resumed its sell-off.

CENTRAL BANK INDEPENDENCE PRODUCES BETTER OUTCOMES

Yellen also repeated the consensus among central bankers that remaining clear of politics was central to their job, a message the Fed has repeated to Congressional Republicans who have argued for closer oversight of monetary policy.

"There is clear evidence of better outcomes in countries where central banks can take the long view," Yellen said. "Sometimes central banks need to do things that are not immediately popular for the health of the economy."

The Fed may face pressure, given Republican control of the White House and both chambers of Congress, to hew to a more mathematical formula for setting rates, something central bankers in general argue should not fully displace their judgement.

Yellen spoke on a day when economic data showed continuing economic momentum, with consumer prices posting their largest gain in six months, new home construction soaring and new claims for unemployment benefits near 43-year lows.

The data underscored Yellen's generally upbeat assessment of where the country stands. There remains "room to run" in the U.S. recovery, Yellen said, and rate increases can likely proceed on a gradual basis. But she noted that wages were rising, growth had accelerated over the second half of the year, and the world economy was on a firmer footing than it had been in recent months when uncertainty about China and Europe had caused the Fed to postpone its rate increase plans.

The dollar is at a 14-year high. That might sound like America is being made great again, but it could undermine economic growth in the United States and elsewhere and pose a threat to global financial stability.

Money managers attending this week's Reuters Global Investment Summit said the extent and pace of any further dollar appreciation will be one of the most important variables for world markets next year.

The global reserve and trade currency has risen in value by around 5 percent since Donald Trump's U.S. presidential election victory last week stunned the world. Long-term U.S. Treasury bond yields have surged too, as investors bet that the infrastructure spending and tax cuts Trump has promised will spur growth and inflation.

But the spike in the dollar and in Treasury yields could choke that growth off before it really gets going.

And while Wall Street has ridden the "Trumpflation" wave to new highs, emerging market stocks, bonds and currencies have slumped as higher U.S. yields lure investors away and push up borrowing costs for firms and households with dollar debt.

Joachim Fels, a managing director and global economic advisor at Pimco, which oversees more than $1.5 trillion in assets, warned that emerging markets may be in for a bumpy ride and that the U.S. economy could be vulnerable.

"It's reaching its limits because if you get too much dollar appreciation it feeds back negatively into U.S. growth and particularly hurts the manufacturing sector, and these are Donald Trump's voters, so I think there is a certain limit," said Fels.

NO WINNERS

The dollar hit its highest level since April 2003 against a basket of currencies on Wednesday as investors bet that a U.S. interest rate hike next month will be followed by more next year, contrasting sharply with the ultra-loose policy of the UK, euro zone and Japanese central banks.

The day before, the Bank for International Settlements (BIS) said the dollar has replaced the VIX volatility index as the most accurate barometer of global risk appetite, or "fear gauge".

A strong dollar and rising Treasury yields make it more expensive for non-financial, non-U.S. borrowers to service dollar-denominated debts that now total nearly $10 trillion. Dollar lending and investment globally could suffer too.

"There may be no winners from a stronger dollar," said Hyun Song Shin, head of research at the BIS, often described as the central banks' central bank.

Emerging markets, which are reliant on foreign capital and vulnerable to outflows as U.S. yields rise, have fallen. The MSCI emerging market index is down more than 6 percent since Trump's victory.

Some central banks, such as those in Malaysia and Indonesia, have intervened directly in the foreign exchange markets to prevent their currencies from falling too far too quickly. Others, with their huge stash of FX reserves being kept back for a rainy day, may be forced to do likewise.

"If the dollar gently goes up, I think we'll be OK. But an aggressively rising dollar will be bad news for emerging markets, quite painful for China and it could undermine risk assets," said Mark Burgess, chief investment officer for Columbia Threadneedle Investments,

The dollar index's best two weeks since February last year and the biggest weekly rise in Treasury yields for years have helped tighten Goldman Sachs' financial conditions index by roughly 30 basis points since the Nov. 8 election.

European and Japanese stocks have enjoyed a post-election boost, in part due to the euro and yen's decline against the dollar.

Didier Saint-George, managing director and member of the investment committee at French asset manager Carmignac Gestion, which manages 53 billion euros of assets, outlines a scenario where developed market equities can continue to do well.

If markets' self-control mechanisms kick in, a lofty dollar and yields will dampen inflation and growth expectations, giving the Fed more room to keep rates down. This will steepen the yield curve, give a boost to banks, and therefore growth.

"But it's rarely a nice straight line you can rely on," he said. "The risk is you get all this growth expectation priced into bonds and the dollar, and they disappoint.

"So you find yourself with higher real rates, little growth, and then you have a problem with your equity valuations."